African Group
proposes cotton distortions scrapped by September

The African Group has now circulated a text
(dated 22 April 2005) for radically reforming trade in cotton and “cotton
by-products”, which it says includes textiles goods. Many members welcomed
the proposal because it has allowed the Cotton Sub-Committee to start
focusing on substance rather than procedure, but some said the sector’s
reform should be part of the full agriculture negotiations package.

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Chairperson Tim Groser concluded the discussion by praising members
for keeping cool in what could have been a heated and unproductive
discussion. As a result the sub-committee’s work is “beginning to move”, he
said, in a well-attended meeting and delegations really interacting with
each other.

He described the sub-committee’s latest discussions as drawing together
various threads of the real situation in the sector: internal reforms a
number of producing countries have implemented; the possibility of
autonomous actions by subsidizing countries and those with high trade
barriers; preferences (such as duty-free market access for exports from
least-developed countries); formal commitments on the three “pillars” of the
agriculture negotiations; the relevance of various dates; development
assistance; and the promotion of trade and marketing.

This is “Proposed Elements of Modalities in Connection with the Sectoral
Initiative in Favour of Cotton, 22 April 2005” (TN/AG/SCC/GEN/2)

The African Group (Rwanda speaking) said the proposal reflects the urgency
of the issue. The heart of the paper contains proposals on all three
“pillars” of the agriculture negotiations, which the group says are in line
with the 1 August 2004 “framework” decision and are intended to speed up the
negotiations. The group wants cotton included in the planned text of July
2005, when the agriculture negotiations chair, Ambassador Tim Groser of New
Zealand, aims to produce a “first approximation” of the agriculture
“modalities”. The African Group’s cotton proposal would amount to full
modalities for the sector, with only some procedural details to be sorted
out.

On the three pillars:

Market access: This would be “improved”, with duties and quotas scrapped for
cotton and its by-products when exported by least-developed countries and
net exporters.

Domestic support: Distorting supports to be eliminated by 21 September 2005
at the latest (the Africans explained in the meeting that this relates to
dates in the cotton dispute (DS267, ruling adopted by the Dispute Settlement
Body on 24 March 2005)). Also proposed are disciplines for preventing
“box-shifting” (recategorizing supports without reducing their distorting
effect), and “ambitious cotton-specific criteria” to be developed for “the
measures authorized under the green and blue boxes”.

Export subsidies: All types of export subsidies on cotton to be eliminated
by 1 July 2005 at the latest (also related to dates in the cotton dispute).

Other proposals include:

Emergency support fund: Amounting to 20% of the highest value of cotton
production in the last three years in each country concerned, to “contain
the serious socio economic consequences for the farming communities” of loss
of revenue, and managed by representatives of donors, producers and
governments. The amount would decrease proportionately as subsidies and
supports are eliminated.

Paraguay, Brazil, Argentina and China were more broadly in favour. However,
China said the reductions in the three pillars should not apply to
developing countries, and opposed including industrial “by-products” such as
textiles — these would come under the non-agricultural market access (NAMA)
talks, China said. China, now a net importer but with over 100 million
people involved in the cotton sector, and Paraguay with cotton sometimes
exceeding 40% of its export earnings, described how important the sector is
to their poorer farmers too. Chairperson Groser said the information
provided by China, Paraguay and others is an important reminder that the
African countries’ problems are shared elsewhere as well.

The EU repeated the recent statement of its trade commissioner, Peter
Mandelson, on fast-tracking cotton by implementing reductions in trade
barriers and domestic supports and eliminating export subsidies from “day
one” (the date that the results of the agriculture negotiations would take
effect) rather than phasing them in over an implementation period. Other
actions could also be achieved by countries taking autonomous actions in
addition to whatever is agreed multilaterally, the EU said.

The US stressed it is committed to dealing with the problem because it
understands the critical role cotton plays. But, the outcome should be part
of the “single undertaking” of the Doha negotiations and part of the
ambitious and comprehensive package on agriculture, the US said (Canada
agreed). The US cautioned that a “early harvest” on cotton would undermine
the “cross-cutting” approach of the negotiations. The US added that its
position on an emergency fund is unchanged — a stabilization fund would not
work and would be anti-competitive, it said. Instead, members should focus
on better aid programmes, the US said. Japan had similar reservations about
the proposed fund.

A third consultation on development aspects was held on Monday 25 April,
chaired by Stuart Harbinson, director of the Director-General’s Office. The
Secretariat summarized on the latest information from that consultation on
development assistance (details to be in this meeting’s minutes).